CRH(CRH) - 2023 Q2 - Quarterly Report

Financial & Operational Highlights CRH delivered strong H1 2023 results with significant growth in sales and EBITDA, driven by robust performance in the Americas and strategic capital allocation, alongside a planned transition to a US primary listing H1 2023 Key Financials CRH delivered a strong first-half performance in 2023, with significant growth across all key metrics. Sales increased by 8% to $16.1 billion, and EBITDA rose by 14% to $2.5 billion, resulting in an improved EBITDA margin of 15.6%. Profit after tax from continuing operations grew 26% to $1.2 billion, with EPS up 31% to $1.58 H1 2023 Summary Financials | Summary Financials | H1 2023 | Change | |:---|:---|:---| | Sales | $16.1bn | +8% | | EBITDA | $2.5bn | +14% | | EBITDA Margin | 15.6% | +90bps | | Operating Cash Flow | $1.0bn | +61% | | EPS (continuing ops) | $1.58 | +31% | - On a like-for-like basis, which adjusts for acquisitions and currency effects, H1 2023 sales were 4% ahead of the prior year, and EBITDA was 7% ahead[89] Trading Overview The Group's performance was driven by strong results in the Americas, where both Materials and Building Solutions segments saw double-digit EBITDA growth. Europe Materials Solutions also performed well with a 13% EBITDA increase, supported by strong pricing. However, Europe Building Solutions faced challenges from adverse weather and softer residential demand, leading to a 15% decline in EBITDA - Americas Materials Solutions: EBITDA was 13% ahead of 2022, as strong pricing and commercial management offset higher input costs and lower volumes due to unfavorable weather[70] - Americas Building Solutions: EBITDA grew by 25%, benefiting from acquisitions and strong commercial progress that counteracted weather-related impacts on activity[90] - Europe Materials Solutions: EBITDA increased by 13%, driven by strong pricing and cost savings that more than offset inflation and lower activity levels[71] - Europe Building Solutions: EBITDA was 15% behind the prior year, impacted by extended winter weather and softer residential demand[91] Capital Allocation CRH is increasing cash returns to shareholders, highlighted by a 4% increase in the interim dividend to $0.25 per share. The company is also executing a substantial $3 billion share buyback program, with $1 billion completed in the first half of the year and another $1 billion tranche underway - The Board increased the interim dividend by 4% to $0.25 per share[67][92] - A $3 billion share buyback program is underway. $1 billion was completed in H1 2023, and a further $1 billion tranche was announced on June 30, 2023, to be completed by September 22, 2023[92] 2023 Trading Outlook The company expects continued robust infrastructure demand in North America, supported by federal and state funding. While residential markets are expected to remain subdued, the overall outlook is positive. CRH anticipates full-year EBITDA of approximately $6.2 billion and net cash inflow from operating activities of around $5 billion Full-Year 2023 Guidance | Metric | Expected FY 2023 | FY 2022 Actual | |:---|:---|:---| | Group EBITDA | c. $6.2 billion | $5.6 billion | | Net cash inflow from operating activities | c. $5 billion | $4.0 billion | | Year-end net debt to EBITDA ratio | 1.1x to 1.3x | 0.9x | - North American operations are expected to benefit from robust infrastructure demand and government funding in clean energy and manufacturing. European markets are expected to see solid infrastructure and non-residential activity, though residential construction will remain challenging[57] Transition to US Primary Listing CRH shareholders overwhelmingly approved the transition to a US primary listing on the New York Stock Exchange (NYSE), which is expected to become effective on or around September 25, 2023. The company believes this move will provide increased commercial, operational, and acquisition opportunities, particularly in North America, which represents about 75% of Group EBITDA - Shareholders approved the transition to a US primary listing at an EGM on June 8, 2023, with the change expected to be effective around September 25, 2023[56][89] - The company anticipates the US listing will accelerate its integrated solutions strategy and deliver higher profitability, returns, and cash for shareholders[36] Segment Performance Review The Group's segments showed varied performance, with strong growth in Americas driven by pricing and acquisitions, while European segments faced mixed conditions due to weather and residential demand Americas Materials Solutions This segment delivered a strong first half, with sales up 9% to $6.1 billion and EBITDA up 13% to $925 million. Performance was driven by solid price progression across all business lines, which more than offset lower volumes caused by unfavorable weather in some regions. Operating profit saw a significant 26% increase Americas Materials Solutions H1 Performance ($ million) | Metric | H1 2022 | H1 2023 | % Change | |:---|:---|:---|:---|\ | Sales Revenue | 5,546 | 6,059 | +9% | | EBITDA | 820 | 925 | +13% | | Operating Profit | 405 | 510 | +26% | | EBITDA Margin | 14.8% | 15.3% | +50bps | - On a like-for-like basis, sales increased by 8% and EBITDA by 12%[44] - Pricing was strong, with aggregates prices up 15%, cement prices up 17%, asphalt prices up 13%, and readymixed concrete prices up 14%[45][46] Americas Building Solutions Americas Building Solutions reported robust growth, with sales increasing 21% to $3.8 billion and EBITDA up 25% to $810 million. This performance reflects strong contributions from prior-year acquisitions, particularly Barrette Outdoor Living, and solid commercial progress. On a like-for-like basis, sales and EBITDA were ahead by 1% and 3% respectively Americas Building Solutions H1 Performance ($ million) | Metric | H1 2022 | H1 2023 | % Change | |:---|:---|:---|:---|\ | Sales Revenue | 3,150 | 3,809 | +21% | | EBITDA | 646 | 810 | +25% | | Operating Profit | 534 | 633 | +19% | | EBITDA Margin | 20.5% | 21.3% | +80bps | - Sales in Outdoor Living Solutions were ahead, driven by good commercial progress and the contribution from the Barrette Outdoor Living acquisition (July 2022)[59] - Building & Infrastructure Solutions sales benefited from increased demand and robust public funding in telecommunications, water, and energy utility markets[52] Europe Materials Solutions Sales for Europe Materials Solutions remained flat compared to the prior year at $4.8 billion, but were 5% ahead on a like-for-like basis. Strong pricing offset lower activity levels in most regions. EBITDA grew 13% to $625 million (14% on a like-for-like basis), driven by pricing discipline, operational excellence, and cost savings Europe Materials Solutions H1 Performance ($ million) | Metric | H1 2022 | H1 2023 | % Change | |:---|:---|:---|:---|\ | Sales Revenue | 4,772 | 4,792 | 0% | | EBITDA | 555 | 625 | +13% | | Operating Profit | 308 | 383 | +24% | | EBITDA Margin | 11.6% | 13.0% | +140bps | - Sales in Western Europe were well ahead of 2022, driven by the UK, Ireland, and France, with positive pricing offsetting lower volumes from subdued new-build residential activity[23] - In Central & Eastern Europe, strong pricing across all countries more than offset softer demand, leading to sales and operating profit growth[24] Europe Building Solutions This segment faced a challenging first half, with sales down 4% to $1.5 billion (6% behind on a like-for-like basis). The decline was driven by lower volumes due to extended winter weather and subdued new-build residential activity. Consequently, EBITDA and operating profit were down 15% and 27% respectively Europe Building Solutions H1 Performance ($ million) | Metric | H1 2022 | H1 2023 | % Change | |:---|:---|:---|:---|\ | Sales Revenue | 1,530 | 1,476 | -4% | | EBITDA | 189 | 160 | -15% | | Operating Profit | 138 | 101 | -27% | | EBITDA Margin | 12.4% | 10.8% | -160bps | - A robust performance from Infrastructure Products was offset by slower markets in Outdoor Living Solutions and Construction Accessories[29] - Outdoor Living Solutions sales declined due to unfavorable weather and a strong prior year comparative, with market demand slowing in Germany, Belgium, and Slovakia[30] Condensed Interim Financial Statements The Group reported increased revenue and profit in H1 2023, with higher operating cash flow, while total equity decreased and net debt increased due to share buybacks and acquisitions Condensed Consolidated Income Statement For the six months ended June 30, 2023, the Group reported revenue of $16.1 billion, an increase from $15.0 billion in H1 2022. Operating profit from continuing operations rose to $1.63 billion from $1.39 billion. Profit before tax from continuing operations was $1.51 billion, and the Group profit for the period was $1.18 billion H1 2023 Income Statement Highlights ($ million) | Metric | H1 2023 | H1 2022 (Continuing Ops) | |:---|:---|:---|\ | Revenue | 16,136 | 14,998 | | Gross Profit | 5,281 | 4,755 | | Group Operating Profit | 1,627 | 1,385 | | Profit Before Tax | 1,510 | 1,203 | | Group Profit for the Period (Continuing Ops) | 1,178 | 938 | - Basic earnings per share from continuing operations increased to $1.58 from $1.21 in the prior year period[41] Condensed Consolidated Balance Sheet As of June 30, 2023, the Group's total assets stood at $46.0 billion, a slight increase from $45.2 billion at year-end 2022. Total equity decreased to $21.3 billion from $22.3 billion, primarily due to share buybacks. Net debt increased to $6.9 billion from $5.1 billion at the end of 2022 Balance Sheet Summary ($ million) | Metric | 30 June 2023 | 31 Dec 2022 | |:---|:---|:---|\ | Assets | | | | Total Non-current Assets | 30,974 | 30,387 | | Total Current Assets | 15,009 | 14,801 | | Total Assets | 45,983 | 45,188 | | Equity & Liabilities | | | | Total Equity | 21,346 | 22,337 | | Total Non-current Liabilities | 13,410 | 13,962 | | Total Current Liabilities | 11,227 | 8,889 | | Total Equity and Liabilities | 45,983 | 45,188 | - Net debt stood at $6.9 billion at June 30, 2023, compared to $4.3 billion at June 30, 2022. The increase is partly attributable to the $1.9 billion acquisition of Barrette Outdoor Living in H2 2022[37][222] Condensed Consolidated Statement of Cash Flows The Group generated a net cash inflow from operating activities of $1.0 billion in H1 2023, a significant improvement from $0.6 billion in H1 2022, driven by higher profitability and lower working capital investment. Net cash outflow from financing activities was $1.8 billion, largely due to share buybacks ($0.96 billion) and dividend payments ($0.76 billion) Cash Flow Summary H1 2023 ($ million) | Metric | H1 2023 | H1 2022 | |:---|:---|:---|\ | Net cash inflow from operating activities | 998 | 621 | | Net cash (outflow)/inflow from investing activities | (906) | 2,125 | | Net cash outflow from financing activities | (1,845) | (1,470) | | (Decrease)/increase in cash and cash equivalents | (1,753) | 1,276 | Notes to the Financial Statements Key notes detail the drivers of performance, significant acquisitions, the impact of discontinued operations, and ongoing capital returns through dividends and share buybacks Key Components of Performance (Note 2) The Group's 8% total sales growth to $16.1 billion was composed of a 4% organic increase, with the remainder from acquisitions. EBITDA grew 14% to $2.5 billion, with organic growth contributing 7% and acquisitions adding significantly. Pre-tax profit from continuing operations increased by 26%, with organic growth accounting for 19% of this increase H1 2023 Performance Bridge vs H1 2022 ($ million) | Metric | H1 2022 | Exchange | Acquisitions | Divestments | Organic | H1 2023 | |:---|:---|:---|:---|:---|:---|:---|\ | Sales | 14,998 | (208) | 813 | (86) | 619 | 16,136 | | EBITDA | 2,210 | (18) | 163 | 2 | 163 | 2,520 | | Pre-tax Profit | 1,203 | (6) | 41 | 50 | 222 | 1,510 | Business Combinations (Note 13) In the first half of 2023, the Group spent $0.2 billion on eight acquisitions. The largest was the acquisition of Ulricehamns Betong AB in Sweden. Total consideration for these acquisitions was $221 million, resulting in $78 million of goodwill. Post-period end, the Group acquired Hydro International, a provider of stormwater and wastewater solutions - The Group spent $0.2 billion on eight acquisitions in H1 2023[64] H1 2023 Acquisitions Summary ($ million) | Metric | Amount | |:---|:---|\ | Total Consideration | 221 | | Identifiable Net Assets Acquired | 143 | | Goodwill Arising | 78 | - Subsequent to June 30, 2023, the Group acquired Hydro International, enhancing its water management solutions portfolio in North America and Europe[65] Discontinued Operations (Note 8) In April 2022, the Group completed the divestment of its Building Envelope business, which was classified as a discontinued operation. This resulted in a profit on disposal of $1.47 billion, recognized in H1 2022. There were no discontinued operations in H1 2023 - The divestment of the Building Envelope business was completed in April 2022[191] Results of Discontinued Operations - H1 2022 ($ million) | Metric | Amount | |:---|:---|\ | Revenue | 647 | | Operating Profit | 95 | | Profit on Disposals | 1,457 | | Profit Before Tax | 1,546 | | Profit After Tax | 1,168 | Dividends (Note 7) The Board has declared an interim dividend of $0.25 per share, a 4% increase from the prior year. The dividend will be paid on November 22, 2023, to shareholders of record on October 20, 2023. Following the US listing change, the default payment currency will be US Dollar Dividend per Share | Dividend | Amount | |:---|:---|\ | 2023 Interim Dividend (Proposed) | $0.25 | | 2022 Interim Dividend (Paid) | $0.24 | - The ex-dividend date is October 19, 2023, and the payment date is November 22, 2023[188] Share Buyback Programme (Note 16) CRH continued its share buyback program, returning $1.0 billion to shareholders in H1 2023. This brings the total cash returned since the program's inception in May 2018 to $5.1 billion. A further $1.0 billion tranche was announced on June 30, 2023, to be completed by September 22, 2023 - The Group returned $1.0 billion to shareholders via share buybacks in H1 2023[275] - Total cash returned under the program since May 2018 amounts to $5.1 billion[275] Risk Factors & Forward-Looking Statements The Group identifies principal strategic, operational, and financial risks, alongside cautionary statements regarding forward-looking information and their inherent uncertainties Principal Risks and Uncertainties The Group faces a range of risks inherent to its global operations. Key strategic risks include industry cyclicality, economic conditions, and portfolio management. Operational risks involve people management, supply chain continuity, and health and safety. Financial and compliance risks include taxation, financial instruments, laws and regulations, and IT/cyber security - Strategic Risks: Industry cyclicality, economic conditions, public policy, climate change, commodity competition, and portfolio management (M&A)[287][288][308] - Operational Risks: People management, securing strategic mineral reserves, health and safety, IT and cyber security, and supply chain continuity[10][11][290] - Financial & Compliance Risks: Financial instruments (interest rate, currency, credit), goodwill impairment, taxation, laws and regulations, and foreign currency translation[14][15][313] Forward-Looking Statements The report contains forward-looking statements regarding CRH's financial condition, results, and business strategy. These statements are subject to risks and uncertainties, and actual results could differ materially. The company disclaims any obligation to update these statements, and cautions readers not to place undue reliance on them - The document includes forward-looking statements concerning demand outlook, business strategy, financial capacity, the US listing transition, and decarbonisation targets[18][295] - These statements are made under the "Safe Harbor" provisions of the US Private Securities Litigation Reform Act of 1995[316] Other Information This section provides a glossary of Alternative Performance Measures (APMs) used by CRH to assess and report its financial and operational performance Glossary of Alternative Performance Measures (APMs) CRH uses several non-GAAP Alternative Performance Measures (APMs) to monitor performance, including EBITDA, Net Debt, and Organic Growth. EBITDA is defined as earnings from continuing operations before interest, taxes, depreciation, amortization, and other specific items. Organic measures exclude the impact of acquisitions, divestments, and currency translation - Key APMs include EBITDA, Net Debt, and Organic Revenue/EBITDA. These are used by management to assess performance and allocate resources[111][277] Reconciliation of Group Profit to EBITDA (Continuing Ops, $m) | Metric | H1 2023 | H1 2022 | |:---|:---|:---|\ | Group Profit for the Period | 1,178 | 938 | | Add back: Income Tax Expense | 332 | 265 | | Add back: Finance Costs less Income | 127 | 177 | | Add back: Depreciation & Amortisation | 893 | 835 | | Other Adjustments | (10) | (5) | | EBITDA | 2,520 | 2,210 |